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Mica tells CUs range of solutions needed on corporates

WASHINGTON (2/11/09)--Pursuing a range of viable solutions makes more

CUNA President/CEO Dan Mica gestures as he answers questions from the audience during his appearance Feb. 9 at the Washington, D.C.-based Metropolitan Credit Union Management Association's (MACUMA) monthly meeting. Mica's topics included the NCUA's Corporate Stabilization Program, congressional and administration efforts to deal with the economic and financial crisis, and CUNA priorities in the upcoming year.

Mica (left) listens to the ideas of one of the MACUMA meeting participants following the CUNA leader's remarks. (CUNA Photos).

strategic sense than focusing only on one single approach to mitigate the cost to credit unions of the National Credit Union Administration’s (NCUA’s) corporate stabilization program, Credit Union National Association (CUNA) President/CEO Dan Mica told a group of Washington, D.C.-area credit union executives this week. Mica recognized some are calling solely for a legislative solution centered on the Central Liquidity Facility (CLF) and said CUNA has also identified that as one possibility. But he advised against “putting all your eggs in one basket.” On CLF, for example, CUNA is looking at whether a regulatory as well as a legislative solution would address the problem. The CUNA leader was the featured speaker Tuesday at the Metropolitan Area Credit Union Management Association (MACUMA) monthly membership meeting. The session took the form of a Q&A with Credit Union Times Executive Editor Sarah Snell Cooke. Mica highlighted the series of solutions CUNA is exploring that would provide needed support to corporates while mitigating the costs of NCUA’s stabilization plan, including:

* Long-term deposits from CUs into corporates; * Use of Central Liquidity Facility (CLF) funds to loan to the National Credit Union Share Insurance Fund (NCUSIF), and seek legislation to allow funding directly to the corporates; * Tap the U.S. Treasury Department's Troubled Asset Relief Program (TARP) for back-up assistance to the NCUSIF; * Assess the premium assessment in stages; * Expand the "CU System Investment Program (CU SIP) to make it more attractive to credit unions; * Address accounting issues that could allow the NCUSIF to recognize the premium expense over time, thus giving credit unions some flexibility on when they must accent for these expense: and * Allow natural person CUs to purchase corporates' troubled assets.

On long-term deposits as an added corporate liquidity source, Mica said the NCUA has indicated that credit unions channeling $15 billion into corporates would do much to mitigate the problem. “I know of several CEOs who, if convinced of the data plus knowing the funds are guaranteed, would put in close to $15 billion,” he added. Explaining TARP back-up assistance to NCUSIF as a possible solution, Mica likened it to an insurance policy deductible: TARP expenditures would occur only in the event losses in the corporates exceeded a certain level, such as $500 million. It would not take the form of an infusion of TARP funds into the corporates. “We feel we would probably never have to actually use TARP under that scenario,” Mica added. Asked by CU Times’ Cooke about discussions resurfacing among credit unions of a possible merger between CUNA and the National Association of Federal Credit Unions, Mica reiterated his view that having a single trade association speaking with one voice would benefit credit unions economically and politically. “I am absolutely convinced that credit unions will never reach their full potential divided with two trade associations,” Mica stated. “You can’t have a house divided against itself with only 7% of the (financial services) market.” He also said the single association did not have to be either CUNA or NAFCU. "Have it be America's Credit Union Association--take the best of both, and move on for the good of the system."